Nonsignatories Can Sometimes Enforce An Arbitration Agreement Based On A Third-Party Beneficiary Or Equitable Estoppel Theory - But Such Was Not The Case Here.
After Kim Ngo purchased a BMW that Ngo alleged was a lemon, BMW sought to enforce an arbitration agreement between the Dealer and Ngo, to which BMW was not a signatory. The trial court agreed that BMW was a third-party beneficiary that could enforce the agreement. The Ninth Circuit reversed. A significant fact is that Ngo sued BMW for breach of warranty, but did not sue the Dealer under the agreement containing the arbitration provision. Ngo v. BMW of North America, No. 20-56027 (9th Cir. 1/13/22) (Parker, sitting by desig., Wardlaw, Hurwitz).
For the three-part third-party beneficiary test applied by Judge Parker, which the panel concluded BMW failed, see Goonewardene v. ADP, LLC, 6 Cal. 5th 817 (2019) (third-party must benefit from contract; contracting parties must have "motivating purpose" to benefit third-party; enforcement must be consistent with "reasonable expectations" of the contracting parties and contract objectives).
As to "equitable estoppel", (a) there was not concerted misconduct between BMW and the Dealer; (b) Ngo did not rely on contract terms or make claims closely intertwined with the contract. Under California law, the manufacturer's warranty is separate from the Dealer's contract terms.
Comments